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02

Employers fear older workers will drive up costs

Open-access content 12th February 2014

Almost half of UK employers are worried they will face higher costs because of the expected increase in workers aged 60-years or over between now and 2020, according to a new report

Is 75 the new 65? Rising to challenge of an ageing workforce, published today, and sponsored by actuaries Towers Watson, revealed that employers were not completely relaxed about the prospect of an ageing workforce. 

The report - which polled 480 executives in 30 different European countries - highlighted that 13% of employers thought older workers were less productive than younger employees. Of those surveyed 16% believe older workers are less motivated and 24% said they take more time off sick.

UK head of pensions John Ball said: 'An ageing workforce creates significant challenges for employers, especially around how to control the cost of benefits provision for this group of workers.' 

He also said employers should recognise that the benefits they offer must be adapted to deliver to the needs of the whole workforce, regardless of age. 

'Where defined benefit pensions still exist, pension provision also costs a lot more: the less time there is to invest contributions before the promised benefits must be paid out, the higher these contributions must be,' he continued.  

'The contributions on offer in defined contribution plans are usually the same regardless of the employee's age but this does not mean that pension costs will stay flat as the workforce ages. 

'In most DC plans, how much the employer pays in depends on what the employee is prepared to contribute.  In our experience, older workers are more likely to take full advantage of the matching contributions on offer.'

The number of older workers is projected to increase by 13%. A combination of higher life expectancy and inadequate savings inevitably means working for longer and higher State Pension Ages will 'give this a nudge'. 


This article appeared in our February 2014 issue of The Actuary.
Click here to view this issue
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Topics:
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